The Trinidad Guardian Newspaper - Bernard Mitchellhttp://www2.guardian.co.tt/byline-authors/bernard-mitchell
enFormer TSTT exec responds to outgoing CEO Roberto Peonhttp://www2.guardian.co.tt/2012-06-06/former-tstt-exec-responds-outgoing-ceo-roberto-peon
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I have to admit I was rather ambivalent about writing this missive after reading with dismay and quiet consternation the April Week One article that captured the details of an interview that the Business Guardian conducted with Roberto Peon, chief executive officer (CEO) of TSTT. Peon has been at the helm of TSTT since January 2007 and has signalled his intention to leave. I eventually decided to make this contribution for two reasons. These being:</div>
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1. The ongoing success of TSTT is important to me</div>
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2. This is an opportunity to educate</div>
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While I readily admit there are foreign tools and systems that are superior to what we have locally, we are our own worst enemies in improving ourselves and our well-being. The fact is we have tremendous local talent that we must invest in and leverage for our development, and not readily accept that foreign things are superior. My experience has provided empirical evidence that expat is not always expert.</div>
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Less there be any doubt, I am of the view that Roberto Peon owes TSTT and, by extension, T&amp;T, some money. </div>
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In the interview with Peon, some of his key revelations about his tenure at TSTT as reported were:</div>
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• That landline services provided by TSTT are no longer a problem</div>
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• That the mobile fraud he met on joining the company has not recurred</div>
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• That when he joined TSTT financial controls were absent and that the company now produces more timely and relevant financial reports</div>
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• That on joining TSTT there were 130 initiatives being undertaken</div>
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• That the company was top-down, with everybody reporting to the CEO and that the CEO created the budget</div>
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• That the Communication Workers’ Union (CWU) resisted his efforts to rationalise the company’s workforce to make TSTT better able to withstand the competition</div>
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• That the CWU was too heavily focused on defending the workers</div>
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• That during his tenure, he was unable to transform TSTT because of an unenlightened and anachronistic union</div>
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• That TSTT has kept market share better than any other incumbent telecommunications operator in the Caribbean</div>
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<strong>Peon’s last hurrah</strong></div>
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My general response to what is obviously Peon’s last hurrah is that this is a man who is clearly out of touch with reality. For the past five years, TSTT has been on virtual autopilot. Apart from his frequent absences from office (no secret to all the employees), TSTT has been without a mission, vision and values for the past five years under the stewardship of Roberto Peon. How does one effectively align and motivate an organisation without these basic, foundational structures is beyond me. Indeed, what was the framework within which the company operated for the past five years? What provided the clarity of purpose, of direction and focus? I dare say if a local executive had dared to do something of this nature at a company like TSTT, he/she would have been vilified and certainly regarded as incompetent. However, we are prepared to accept this from supposed expat experts who really do not know much more than us. But let’s review on an individual basis the points identified above that are supposed to be the crowning glory of Peon’s five-year tenure at the helm of TSTT.</div>
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<strong>Landline issues</strong></div>
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The landline network has not improved—make no mistake. Indeed, over the past five years, apart from what was in train when he arrived at TSTT, minimal investments have been made in the landline network. The growth and use of mobile services as provided by Digicel and TSTT have resulted in a reduced emphasis on landlines. The number of landlines managed by TSTT has been declining because many residential customers either don’t bother with them, or have given them up, or have transferred to Flow or only use their mobile phone. With respect to business customers, some have transferred to Flow while, in many cases, trunk lines to businesses are no longer individual copper lines (many are T-1s with 24 lines on two copper pairs) and many are being provided via fibre optics, so the numbers served via the copper cables are significantly less. Hence, a reduction in lines will correlate with reduced complaints, but those who have issues still wait an inordinate period of time for resolution. </div>
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<strong>Mobile phones fraud</strong></div>
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The root cause of the mobile fraud he makes mention of was identified months before Peon joined the company and steps were well in train to deal with it when he arrived. It is instructive to note that the fraud pertained to post-paid mobile and not prepaid, contrary to what Peon indicated. Further, the fraud resulted from the decision to apply the roaming feature to all mobile phones without proper controls being established. Thus, the root cause of the mobile fraud Peon spoke about essentially related to poor decision-making. There was no exposure on the prepaid units while there was significant exposure on the post-paid units that resulted in the $100 million fraud. Given that the basis for the fraud was known, it was easy not to repeat it. The act of not repeating such an unwise decision is not exactly level-five leadership. So, no kudos are really warranted for the non-recurrence of the mobile fraud.</div>
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<strong>Lack of financial controls; 100-plus initiatives</strong></div>
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TSTT has always been strong with respect to its financial controls so this statement clearly is a revelation to me. Further, prior to the advent of Peon, the company always produced its financials in keeping with the timetable and structure established by Cable &amp; Wireless, so I am at a loss to ascertain what new systems were introduced unless there were new requirements from Cable &amp; Wireless. His statement must have been a painful one to reconcile for the faithful soldiers who have created a positive image and legacy for the finance division over the years. With respect to the number of initiatives, a company can have ten initiatives and out of these 100 sub-initiatives. So what should we believe of someone who is trying to convince the world that he has accomplished much when he has not? </div>
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<strong>Increasing top-line management</strong></div>
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When I worked as chief operations officer for the previous CEO at TSTT, there were ten executives reporting to him. No one else. This top-down scenario, therefore, is also a revelation to me. Additionally, strategic plans along with budgets were produced by the finance division. I was part of this process. The then CEO reviewed the final product and made changes as he saw fit. So to talk about top-down and bottom-up is without merit. It has no meaning. </div>
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Peon is right when he says that TSTT is overstaffed when compared to industry standards. The current structure of the collective agreement with the CWU is not the easiest to navigate where staffing is concerned. However, he has to take full responsibility for not being able to address this issue effectively. Why? Between 2005 and 2007, TSTT’s staffing was reduced from 3,600 to 2,700 while the number of executives was reduced from 14 to ten.</div>
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On joining TSTT in 2007, Peon increased the number of executives from ten to 17 in a company that was already overstaffed. By that single act, he immediately lost the moral authority to tell anyone, let alone the union, about reducing the headcount. He started off on the wrong foot. The other point is that when Peon joined the company in 2007, there were plans in place to exit customer premise equipment for fixed-line services and, in the process, address a major area of staffing. He failed to execute on these while this has been the model throughout the region for years. Additionally, he had options available to him to progressively adjust staffing levels primarily through attrition, retirement and voluntary separation. He explored none of these effectively. </div>
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<strong>Compensation packages</strong></div>
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Beyond the issue of staffing, however, Peon created further challenges for the company by implementing a compensation structure that was blatantly skewed in favour of management, and more so executives, really enjoying the spoils while the rest of the company sucked salt. The end result was that the union demanded its share of the pie (can’t blame them), so Peon is now leaving a scenario of overstaffing that is compounded with above market wages at all levels in the company. The question now being asked is whether the prevailing TSTT model is sustainable. The last time I checked, the role of the union was to defend and seek the rights and well-being of its members. What did he expect? Having dealt with the CWU for more than a decade, my inference is that he lacked the smarts to engage the CWU in a manner that delivered value to the organisation. If Peon’s idea of transformation is confined to staffing levels, then this issue is addressed above. Beyond staffing, any other issue was totally within his control. TSTT has been noted for introducing new technology over the years without any adverse impact on the business. Along with new technology comes new structures, new processes, new skill sets and new behaviours. None of these were new to TSTT and have been part of the DNA of the company long before Peon appeared at the door. So this transformation challenge is a mystery. The bigger issue here, however, is that if it is acceptable for Peon to stand up and say, “I could not transform the organisation because of the union,” then on what basis can he then hold any employee accountable for effecting any kind of change in the company? He lost the moral authority to challenge or discipline any of his subordinates if they were to say that they cannot achieve their objectives because of the union. </div>
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<strong>Market penetration</strong></div>
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With respect to TSTT keeping market share, the fact is that when Peon assumed the position of CEO in 2007, TSTT’s mobile base was one million. The market penetration was about 90 per cent at the advent of competition. This was unlike any other Caribbean island where there was still much room for growth of the mobile market when competition was introduced. Thus, while in other regional markets it was a combination of an intense focus on totally new customers and a reduced focus on attracting customers away from the incumbent, locally, Digicel had to invest more energy, effort and cost because they had to take customers away from TSTT to build their base. There were significantly fewer opportunities for targeting individuals who did not already have mobile service. Today, the Telecommunications Authority of T&amp;T reports that Digicel is the market leader, so relatively speaking, TSTT has performed worse than some of its regional counterparts. In my opinion, Peon’s revelations regarding his tenure have been weighed in the balance and found wanting. And these were clearly his best points. They simply cannot withstand the scrutiny of the informed. Notwithstanding these “revelations,” there are other aspects of his stewardship that begs even deeper scrutiny. The first issue is, when did Peon realise that he was unable to achieve any transformation at TSTT? After all, this was his primary objective. And why didn’t he ride out at that point when he discovered that he was failing? So, was he receiving money under false pretenses?</div>
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<strong>Bonus system</strong></div>
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On assuming office, Peon changed the bonus system for management staff. A good move given his strategic objectives. The new bonus system called for 200 per cent of base salary for executives, 100 per cent for heads of departments and 50 per cent of base salary for middle managers and professionals. Given the implementation of this bonus system, over the years he refused to give any increases in base salary to managers because it was argued the bonus system effectively catered for any increase in base salary. However, while this was the rationale given to managers, executives continued to receive increases in base salary even though their bonus percentage was superior. This type of action triggered two negative outcomes. The first is that the bonus system and salary increases for executives created the demand for increased wages from top to bottom as mentioned above.</div>
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Secondly, this type of deception created a deep-seated mistrust of the executive ranks. It is instructive to note the company no longer does an employee satisfaction survey. Further, I am advised that for the year 2010/2011, the bonus payment to executives and managers was greater than the profit made by the company. Bonus systems are useful tools, but this clearly is an ineffective bonus system. The year (2006/2007) in which Peon took the controls at TSTT, the company recorded its first-ever financial loss. It was not his fault, but something he inherited. The reason for this loss, however, was because of specific, known decisions made and actions undertaken by the company during that year.</div>
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<strong>Root causes for loss</strong></div>
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The root causes of the financial loss were the significant marketing spent as the company supported the Soca Warriors as they journeyed to Germany and also engaged in a fierce battle with Digicel ($190 million), the subsidy on mobile phones as the company ramped up its customer base ($680 million), the fraud that resulted from the application of the roaming feature to all mobile phones ($100 million), the subsidisation of roaming rates whereby customers were billed a lower rate than the foreign carriers were charging (estimated at $20 million). Even before the year ended, it was clear to the management that these items had created the loss and once treated with, the company was going to return to profitability. As expected, the expenditure for each of these items was significantly less in subsequent years. However, when the company turned a profit in 2007/2008, Peon declared that he had turned around the company. What would have led him to believe that this was a turnaround? Any first-year management student knows this does not constitute a turnaround. There were no endemic adverse situations to overcome. But what do you think was the effect and impact of his assertion? First, the leaders think that they are better than they really are. They relax thinking the worst is past and the company suffers because key individuals have taken their eyes off the ball. </div>
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The legacy that Peon is leaving is that of a non-achiever. This view is based on a few key factors, these being:</div>
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• For a company overrun with expat executives and expat consultants, it has experienced an overall decline</div>
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• The TSTT mobile network is woefully substandard and is characterised by dropped calls and delayed delivery of voicemail, with an expat at the helm of technology and millions of dollars at his disposal. Digicel has moved ahead with the introduction of 4G while TSTT is advertising about its plan to introduce 4G. My prediction is that henceforth, TSTT will trail Digicel</div>
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• The landline network is still ineffective</div>
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• Market share has declined significantly for broadband and mobile</div>
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• The bonus system has created a culture of greed as against performance and delivery</div>
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• The company is staffed by a demoralised employee base who are of the view the leaders only care about themselves</div>
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• No succession planning as there is no one to effectively succeed Peon after all this time</div>
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• The customer base is largely ambivalent about the company</div>
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• The corporate brand is a confused one </div>
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• The organisation structure has what can only be described as weird combinations, such as human resources with call centre and administration with regulatory</div>
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• New services have been introduced with unsustainable business models which make them non-viable </div>
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• The corporate financial performance has declined</div>
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Many employees at TSTT are well aware of what Peon met when he came to the company and can readily compare what he inherited with what currently prevails. There is no doubt the fundamentals of the company were solid when he arrived. So, is TSTT a better place today? Certainly not. The simple point is that the negatives significantly outweigh the positives at the company and it has lost its lustre. Therefore, the final questions to the decision-makers are:</div>
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In retrospect, was the company justified in paying the expat premium to Peon, and is the company going to repeat this mistake all over again?</div>
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I guess that it’s time for another turnaround. Any takers?</div>
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</div></div></div>Wed, 06 Jun 2012 13:07:07 +0000jason41490 at http://www2.guardian.co.ttBernard Mitchell